Digital Britain: Ofcom to have say in newspaper mergers

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The Office of Fair Trading has decided against a major reform of the rules governing local media mergers.

The regulator said today in a statement to coincide with the Digital Britain report that only “modest changes” were needed – despite intense lobbying from newspaper groups.

The OFT was asked by communications minister Stephen Carter to look at the case for relaxing the regime to allow for further consolidation in the regional press.

It concluded that the current system was “robust and flexible” and no legislative change was necessary.

But it said Ofcom would be given a bigger role in deciding whether future mergers should go ahead by carrying out a “local media assessment” in each case.

OFT chief executive John Fingleton said: “Competition between publishers is important, not just for providing quality, cost effective content to readers, but also to ensure that the most efficient, customer focused, dynamic players take advantage of the structural and cyclical challenges that lie ahead.

“The current merger regime came into force in 2003, and we are confident that it is fit for the needs of the media sector in the 21st century.

“If there are significant transactions that publishers or others are keen to pursue, we will review them on their merits, taking into account the impact on customers and the realities of the marketplace.”

The OFT was asked to look at the merger regime three years after media regulator Ofcom concluded that no changes should be made.

Under the umbrella of the Local Media Alliance, they presented Carter’s policy team with what they said was “overwhelming evidence” that the current rules on local newspaper mergers are outdated.

They argued that changes in the media landscape – including the growth of the internet – mean there is no longer any danger of newspaper monopolies leading to unfair competition for advertisers.

A relaxed media merger regime would give the regional press more freedom to consolidate, trade assets and rearrange the current ownership map.

None of the groups has publicly said what it plans to buy or sell, but some analysts have predicted that two or three “supergroups” might emerge, benefiting from greater economies of scale.

At least 1,000 editorial jobs have been lost in the regional press since last summer and dozens of titles have closed, as they have grappled with the challenges of long-term circulation decline, increasing online competition and a disastrous drop-off in advertising as a result of the recession.

The National Union of Journalists has voiced concern about a relaxed ownership system, warning that it could lead to a “spiral of decline”.

In its submission to the OFT review, it said “intense profiteering” would continue in a consolidated regional newspaper industry, and cost savings were unlikely to be pumped back into journalism.

The union had instead hoped that the industry would switch to a new model of management, based around local buy-outs and local businesses taking individual titles into private hands.

The NUJ said in a statement today: “The NUJ has consistently argued that ownership rules are still hugely important so we’re very pleased pressures from media owners for them to be weakened have been resisted.

‘The vital importance of vibrant local media to our democracy has been recognised by people on all sides of the debate over the last few weeks. Media plurality must be at the heart of any ownership decisions that are taken in the future.

The NUJ will continue to pressure the government for a strengthened public interest test to ensure that ownership rules work in the interests of citizens and communities.”

Trinity Mirror chief executive Sly Bailey said: “We have consistently argued that a change in primary legislation is not necessary to address these issues, simply that the existing merger regime fully recognises that the old narrow definitions of print markets are no longer fit for purpose. So the Ofcom review process could be a clever answer to a difficult problem.

“Provided that it shortens rather than lengthens the process, Ofcom involvement and the new Local Media Assessment appear to be a step in the right direction.

“Whether it works or not depends on the detail and we look forward to reviewing the OFT’s guidance note.”